Why Are Employers Across the Country Taking Back Raises?

Posted on December 22, 2016 by Phil Gibbons Law, P.C. Team

On December 1, 2016, new overtime regulations were scheduled to go into effect that would have made salaried workers who earn less than $47,476 per year eligible for overtime pay. The Department of Labor estimates that 4.2 million U.S. workers would have benefited from this change. Many employers responded to the new law by announcing they would be giving raises to salaried employees to bring them above the $47,476 threshold level— a move that would allow them to continue to avoid paying overtime. But, salaried employees in line for these raises still would greatly benefit from this extra income. In some cases, the announced raises exceeded $7,000 per year.

About a week before the new regulations would have gone into effect, a federal judge in Texas issued a nationwide injunction, blocking the new regulations. The Department of Labor is fighting the injunction, but the lawsuit will be tied in the Court system for the foreseeable future.

As for the employee raises, employers quickly took them back. And with that, plans for paying off debt, purchasing health insurance, or just having a little more cushion to afford daily expenses were taken away also.

It will be interesting to see what happens with the new overtime regulations. On one hand, the legal grounds for the injunction are questionable and may very well be reversed on appeal. On the other hand, Donald Trump has picked Andrew Puzder as his Secretary of Labor, a fast-food multi-millionaire who has a history of violating wage and hour laws and who has gone on record as opposing the new overtime regulations. The good news is that if the injunction is overturned, the new regulations cannot simply be repealed by the new administration. These regulations were years in the making and it will take a long time to undo them.

So, where does that leave the 4.2 million workers who should have started earning overtime or higher salaries as of December 2, 2016? Legally, the answer is unclear. Real-world, they will continue to earn substandard wages and work long hours without overtime pay.